Leaderboard Zone

This morning (London time) I was on a panel featuring Simon Levene of Yahoo, among others. The focus was Web 2.0 and venture capital (fittingly, it was sponsored by FirstCapital). Simon, who is MD here for Yahoo in Business Development, mentioned something that struck me as both obvious yet somehow not stated very clearly. Addressing the audience of mostly VCs, he said:

“Folks like Yahoo will be competing with you for deals.”

Levene mentioned to me later that Google has even set up a fund to compete with VCs for early stage company financing (I had not head this before), and that Yahoo feels it can and must compete to buy early stage companies before VCs can get in with larger financing. An interesting development. He added that entrepreneurs are weighing the risks of having to execute against the exit requirements of a second or third round of financing, vs. the bird in the hand of a deal with a big player like Yahoo, and often, as with Flickr, they are going with the platform.

UPDATE: I pinged good sources at Google, who declare definitively that Google is not running a VC fund….

Actually it makes sense for Google/Yahoo to cover all bases. Both employ really bright people but these people are not necessarily innovators. (Microsoft is perhaps, in some areas, a classic example of this problem.) The innovators are more often to be found in the startups. By getting in on the ground floor, before the VCs, a Google/Yahoo fund would get first crack at any Intellectual Property. And the main threats to the big search businesses will come from smaller ones that do it better – as Google proved with Altavista. (Though there were other factors of course.)

So any idea what the platforms might want to buy? There’s been a lot of talk about Yahoo! and Google moving in the wireless space… Say Google would like to create a gPhone, or Yahoo a yPhone, what would they need?